Correlation Between Leisure Portfolio and Vanguard Industrials

Can any of the company-specific risk be diversified away by investing in both Leisure Portfolio and Vanguard Industrials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Leisure Portfolio and Vanguard Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leisure Portfolio Leisure and Vanguard Industrials Index, you can compare the effects of market volatilities on Leisure Portfolio and Vanguard Industrials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Leisure Portfolio with a short position of Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Portfolio and Vanguard Industrials.

Diversification Opportunities for Leisure Portfolio and Vanguard Industrials

0.56

Correlation Coefficient

Leisure Portfolio  Vanguard Industrials

Very weak diversification

The 3 months correlation between Leisure and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Portfolio Leisure and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials and Leisure Portfolio is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Leisure Portfolio Leisure are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of Leisure Portfolio i.e., Leisure Portfolio and Vanguard Industrials go up and down completely randomly.

Pair Corralation between Leisure Portfolio and Vanguard Industrials

Assuming the 90 days horizon Leisure Portfolio Leisure is expected to generate 1.15 times more return on investment than Vanguard Industrials. However, Leisure Portfolio is 1.15 times more volatile than Vanguard Industrials Index. It trades about 0.02 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about -0.02 per unit of risk. If you would invest  1,871  in Leisure Portfolio Leisure on March 5, 2024 and sell it today you would earn a total of  4.00  from holding Leisure Portfolio Leisure or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Leisure Portfolio Leisure  vs.  Vanguard Industrials Index

Leisure Portfolio Leisure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leisure Portfolio Leisure has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leisure Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Industrials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Industrials Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Industrials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leisure Portfolio and Vanguard Industrials

The main advantage of trading using opposite Leisure Portfolio and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leisure Portfolio position performs unexpectedly, Vanguard Industrials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Industrials will offset losses from the drop in Vanguard Industrials' long position.

The idea behind Leisure Portfolio Leisure and Vanguard Industrials Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.